With the Medicare composite rate increase that went into effect January 1, 2000, the Health Care Financing Administration opened the exception request cycle as of March 1, 2000. Those facilities with previously approved exception rates had until February 29, 2000, to submit a request to their Medicare intermediary for retention of those rates. The Medicare intermediary then had ten days to notify the provider whether their request for retention was approved. Those facilities that may qualify for an exception rate now have until August 28, 2000, to submit an application. This article will provide a brief overview of the exception request process and discuss its implications for outpatient dialysis providers.

When the Health Care Financing Administration (HCFA) established the composite rate payment system, it recognized that a number of outpatient dialysis facilities would incur costs higher than the composite rate for reasons beyond their control. To qualify for an exception to the composite rate, a facility must document that its composite rate costs are greater than the composite rate, and it must meet one or more of the following criteria:

Atypical Patient Mix - The criterion applies to facilities with a high proportion of patients who require intense dialysis services and special dialysis procedures, such as pediatric patients. Facilities must submit a profile of patient mix statistics including age, diabetic status, presence of hypertension, mortality rate, transplantation rate, new patients starts, and hospitalization rate. HCFA will compare a facility's patient mix profile to national data contained in its Patient Profile Tables in order to determine whether the facility does, in fact, service an atypical patient mix.

Isolated Essential Facility &emdash; This criterion was designed for facilities that are the onl supplier of dialysis services in a particular geographical area. A facility must demonstrate that it is both isolated and essential based on the patients' average distance and driving times to their regular facility and the next closest facility.

Self-Dialysis Training &emdash; This criterion concerns patients who are being dialyzed in an accelerated home dialysis training program, defined as follows:

• Hemodialysis: less than 25 training treatments.
• CAPD & CCPD: less than 15 training treatments.

HCFA recognizes a minimum number of training treatments to ensure adequate patient training. The minimum number for hemodialysis is 15, and for CAPD and CCPD the minimum number is 5.

Frequency of Dialysis &emdash; Facilities with more than 15% of their hemodialysis treatments attributed to patients dialyzing fewer than three times per week can claim this criterion.

Extraordinary Circumstances &emdash; Facilities that incur higher costs due to circumstances beyond their control such as nature disasters like floods, hurricanes, and earthquakes &emdash; can claim extraordinary circumstances.

Facilities have 180 days to apply for an exception request from the date that HCFA opens the process/window. The exception request is filed with the Medicare intermediary, which has 15 working days to determine whether the application is complete and whether the facility's costs are reasonable and allowable before forwarding it to HCFA. HCFA then has 45 working days to render a final decision.

Approved exception requests are effective as of the filing date with the Medicare intermediary. An exception request is considered approved unless it is disapproved within 60 working days after it is filed with the intermediary.

The opening of the exception process/window may be triggered by one of two events: 1) legislative changes in the composite rate, or 2) when there have been no changes in the composite rate and HCFA administratively determines that sufficient time has elapsed since the previous exception window.

During the 1980s, in 1991, and now in 2000, the exception process was opened by a change in the composite rate. It has been almost seven years since the last exception request cycle was open (from November 1, 1993 through April 29, 1994), which was when HCFA opened the process administratively.

The detailed process and filing requirements can be found in Chapter 27 of Medicare's Provider Reimbursement Manual (PRM).

Changes to the Exception Request Process

Over the years, HCFA has denied many exception requests that were subsequently appealed to the Provider Reimbursement Review Board (PRRB). In many of those appeals, the PRRB overturned HCFA's denials because they were based on the PRM criteria and process, which is not considered binding. In an effort to further bolster its review and decision-making process, HCFA codified the PRM criteria and process into regulations which were adopted on August 15, 1997.

Prior to the final adoption of these regulations, HCFA received several public comments. Some of the comments resulted in additional changes to the proposed regulations that can be summarized as follows:

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• Facilities can retain a previously approved exception rate by filing a request with the Medicare intermediary 30 days prior to the opening of the exception window.

   

• Facilities must compare the most recently filed cost report to the last two prior years' cost reports.

   

• Overhead costs will be considered as part of the exception rate if the facility submits appropriate documentation.

   

• Facilities applying under the isolated essential facility criterion are generally not located in a metropolitan statistical area.

   

• In reviewing an isolated essential facility exception request, HCFA will consider other dialysis facility usage by area residents (other than applying facility's patients).

   

• Clarification of the relationship between payment methodology for CAPD and CCPD daily sessions and three-days-per-week hemodialysis training treatments.

   

• A facility may request an exception if the facility elects to train its patients using a particular treatment modality more often than during each dialysis treatment and, as a result, the number of its billable training dialysis sessions is less than its actual training sessions.

   

• To justify an accelerated training exception request, the facility must document a significant number rather than all training sessions that were provided during the shorter training period.

Implications for Dialysis Facilities

The most significant change in the process pertains to facilities with previously approved exception request. Under the old process, exception requests expired when a new window opened and all facilities were required to file a new exception request. Now, facilities with an approved exception have the option to "roll" the exception rate rather than submit a new application.

This change is somewhat of a mixed blessing because the facility must submit an application to its Medicare intermediary 30 days prior to the new exception window opening.

A February 2000 Medicare Program Memorandum to the Medicare intermediaries provided general instructions regarding the conditions that must be met when making the determination whether to allow retention of a previously approved exception. These include submission of the latest filed cost report (which supports the fact that the facility's cost per treatment is not less than the previously approved exception amount), and certification that the circumstances for the exception criteria have not changed since the granting of the exception.

HCFA did not specify for the Medicare intermediaries other applications requirements, and, historically, the intermediaries have demonstrated various levels of understanding of the exception request process. This could lead to inconsistent data requests and arbitrary decision-making processes. The recent initial experience with this process may provide future guidelines for the retention process and clarify what documentation will be required.

August 28 Deadline

Facilities considering filing for an exception request should perform an assessment to determine whether their composite rate costs are greater than the composite rate and which criteria they can satisfy. All requests for this cycle must be submitted by August 28, 2000.

With another composite rate increase slated for January 1, 2001, the exception cycle will most likely reopen. Facilities will once again have the choice to elect to retain an exception they receive during the current cycle, or proceed with a new application during the next cycle.

The exception cycles provide dialysis providers with the potential to improve their financial positions, and any facility that may meet the requirements should conduct an assessment and take advantage of the opportunity being presented.

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